Bessent flags bigger debt buyback potential, coming fiscal plan

Treasury Secretary Scott Bessent announced plans to expand efforts to buy back costlier debt and a new fiscal initiative to address the highest borrowing costs in years. Bessent stated that the administration would unveil the initiative at the end of this week or beginning of next week. The move aims to ensure orderly trading in a thin summer market and get investors to focus on fundamentals.

The Treasury Department increased the size of buybacks for longer-dated securities by at least double, though the market impact was short-lived. Bessent hinted at a potential expanded buyback operation exceeding the current $4 billion plan, starting in September. The announcement followed 30-year Treasury yields reaching their highest in almost two decades and 10-year rates hitting levels unseen since before Trump took office.

Bessent emphasized that the administration is focusing on fundamentals and has a broad toolkit to tackle high yields. He also mentioned the potential for a fraud task force to save "hundreds of billions of dollars" and suggested cutting back on programs being "frittered away." Bessent expressed skepticism about the administration's ability to significantly impact the deficit and noted a "very good chance" the US may have already seen a peak in the fiscal deficit.

He attributed this to a revival of tariff revenue as the administration reconstitutes import duty programs following the Supreme Court's invalidation of much of the President's levies. Bessent remains optimistic about the US economy, citing economic growth and inflation primarily driven by temporary energy issues. He also reiterated a strong dollar policy and hinted at upcoming measures against Iran's economy.